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Inflation is biggest risk for property investors in Asia

Property investors in developing countries in Asia face a greater risk from inflation than from an economic slowdown, according to a leading bank.

The Asian Development Bank has cut its 2008 average growth forecast for developing Asia while boosting its forecasts for inflation.

'While global growth is rapidly slowing, the slowdown in emerging economies in Asia has been relatively modest. On the other hand, inflation is accelerating rapidly,' said ADB President Haruhiko Kuroda.

He said he hopes that inflation will slow to around 5% in 2009 but uncertainty remains over commodity prices and monetary tightening measures in some countries.

'Inflation is the greatest risk in emerging economies in Asia,' Kuroda said, adding that while it has peaked in China, South Korea and Thailand, it is accelerating in countries like Vietnam and Pakistan. 'Rather than supporting economic growth, the biggest policy challenge is tackling inflation,' he added.

Kuroda said that while China's economy was slowing, it would still mark high growth of around 10% this year and next year, in line with current ADB estimates.

Overall ADB's 2008 average growth forecast for developing Asia will drop slightly from its current projection of 7.6% while its 2009 estimate will likely fall to around 7%, down from 7.8%.

It expects to revise up its inflation forecast for developing Asia to around 7 to 7.5% this year from 5.1%.